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The FTC reached a settlement with online advertising company Chitika, Inc. that ends the company’s allegedly deceptive practice of tracking consumers’ online activities even after they have chosen to opt out of online tracking on Chitika’s website.

The FTC investigated Chitika as part of its ongoing efforts to protect consumers’ privacy online. Chitika, whose website states that it delivers three billion ad impressions a month, acts as a go-between for websites and advertisers. According to the FTC complaint, Chitika buys ad space on websites and contracts with advertisers to place small text files called cookies on those websites. Chitika also uses a technique known as behavioral advertising – by placing “cookies” on consumers’ computer browsers, the company tracks consumers’ activities on the web, including searches the consumer has conducted and sites the consumer has visited. Based on consumers’ online activities, the company then displays ads to them that correlate to their interests.

The FTC alleged that in its privacy policy the company says that it collects data about consumers’ preferences, but allows consumers to opt out of having cookies placed on their browsers and receiving targeted ads. The privacy policy includes an “Opt-Out” button. Consumers who click on it activate a message that states, “You are currently opted out.”

According to the FTC complaint, from at least May 2008 through February 2010, Chitika’s opt-out lasted only 10 days. After that time, Chitika placed tracking cookies on browsers of consumers who had opted out and targeted ads to them again. The FTC charged Chitika’s claims about its opt-out mechanism were deceptive and violated federal law.

The settlement bars Chitika from making misleading statements about the extent of data collection about consumers and the extent to which consumers can control the collection, use or sharing of their data. It requires that every targeted ad include a hyperlink that takes consumers to a clear opt-out mechanism that allows a consumer to opt out for at least five years. It also requires that Chitika destroy all identifiable user information collected when the defective opt out was in place. In addition, the settlement requires that Chitika alert consumers who previously tried to opt out that their attempt was not effective, and they should opt out again to avoid targeted ads.

The Commission vote to approve the administrative complaint and proposed consent agreement was 5-0. The FTC will publish an announcement regarding the agreement in the Federal Register shortly. The agreement will be subject to public comment for 30 days, beginning today and continuing through April 14, 2011, after which the FTC will decide whether to make it final. Consumers can file a public comment online at https://ftcpublic.commentworks.com/ftc/chitika.

Copies of the complaint, the proposed consent agreement, and an analysis of the agreement to aid in public comment are available from both the FTC’s website at http://www.ftc.gov and the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580.

NOTE: The Commission issues an administrative complaint when it has reason to believe that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the respondent has actually violated the law. The consent agreement is for settlement purposes only and does not constitute admission by the respondent of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $16,000.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,800 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics.

(chitika)